Fall 2006

Endowments That Work

WOOSTER: How many investment managers does the College currently employ?

MASSEY:Thirty-four, as of July 31.

WOOSTER: Is there a limit to how much the College will invest with any one manager?

MASSEY: There’s not a hard and fast rule, but when we get up to seven or eight percent we begin to question whether we should pare back.Twenty years ago, it wasn’t unusual for the College to invest as much as 15 percent with a single manager, but we risk-manage much more aggressively than we have in the past. Right now, our largest investment with one manager is eight percent, with a domestic all-cap equity manager.

WOOSTER: How do you track and manage such a large portfolio of managers?

MASSEY: The investment committee reviews detailed reports on each manager’s results, as well as overall endowment performance, on a monthly basis. Massey, Quick & Co. LLC donates its services to assist the committee with portfolio accounting, performance reporting, and due diligence. Committee members and senior staff frequently meet with our investment managers, and we make changes as necessary. We are loyal to performance.We are not loyal to managers.

WOOSTER: When the investment committee evaluates potential managers, what are you looking for?

MASSEY: Well, we like old pilots—managers who have performed well in all types of markets.We believe in active management. So we’re not interested in index funds.We believe we can find managers who bring value to the table above their benchmarks.

Before we invest with a new manager, we research their investment process, their management team, and their results.We must understand why they have been successful in the past and if that process is repeatable.We assure that each firm has the proper infrastructure to support their business.We conduct background checks on potential managers and meet them face-to-face. Committee members analyze the impact of adding a particular manager on the overall portfolio, using computer models.

For us, the perfect manager is someone who can hold their own when the wheels are falling off and then capture the returns (though maybe not all of them) when things are going well.

WOOSTER: You and your colleagues on the investment committee are all busy people, yet you devote an enormous amount of time and energy to managing the College’s endowment.Why?

MASSEY: It’s a labor of love for all of us, because the endowment is so important to the College and especially to our students. Each year, the payout from the endowment contributes more than $10 million to the College’s operating budget. Outstanding endowment performance allows us to attract and retain good students and good faculty, and maintain outstanding facilities. It’s an important component of everything we do.

It’s one of the first things I think about when I wake up every morning.

*Blended Benchmark consists of 60% S&P 500, 15% MSCI EAFE, 20% Lehman Aggregate Bond Index, and 5% 90-day Treasury Bill.

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